GARETH MACKIE

Royal Bank of Scotland today said it has agreed to pay up to £800 million to settle claims dating back to its £12 billion rights issue in 2008.

The Edinburgh-based lender, which remains 72 per cent owned by the taxpayer, said the payment, being made without any admission of liability, was aimed at minimising “further material litigation expense and management distraction”.

We are pleased to have reached this agreement

Ross McEwan

The settlement has been agreed with three out of the five shareholder groups, representing 77 per cent of the claims by value relating to its 2008 cash call, just before that year’s financial crash. Investor action groups had alleged that the bank’s prospectus failed to include material information about the state of its finances.

RBS said today that it was “willing to make available settlement sums of up to £800m assuming settlement of all claims, to be split among all five shareholder groups, subject to agreement and claim validation”.

It added: “RBS will now seek to agree finalised terms with members of the remaining two groups whose claims are presently continuing. Any claims for which settlement is not achieved will, however, continue to be vigorously defended. The trial for such claims is due to commence in March 2017.”

Sandy Chen, banking analyst at Cenkos Securities, said the settlement was “welcome news” for RBS, which last week emerged as the worst performer in a tough Bank of England stress test.

He added: “If settlements can be reached with the remaining two groups on similar terms, the full settlement amount of £800m would be covered by existing provisions. This would finally put to bed that particular ghost of Christmas past, leaving the US RMBS [residential mortgage-backed securities] lawsuits/fines and the Williams & Glyn disposal as the final big-ticket items to resolve.”

RBS said in October that it would miss its deadline to sell off the 300-branch Williams & Glyn business by the end of next year despite “positive” talks with potential buyers. The group must offload the division to comply with European state aid rules linked to its £45bn bailout at the height of the financial crisis.

The group recently agreed to pay $1.1bn (£865m) to settle two lawsuits in the US over the sale of toxic residential mortgage-backed securities, while the rights issue legal action is linked to a cash call overseen by disgraced former boss Fred Goodwin. In April 2008, it asked existing shareholders to inject £12bn into the firm to strengthen its reserves after shelling out £49bn to acquire Dutch bank ABN Amro.

But the deal proved toxic and, just months later, the value of RBS shares plunged 90 per cent and the UK government had to step in and bail out the lender.

The group’s current chief executive, Ross McEwan, said: “We have been very clear that we wanted to deal with as many of our legacy litigation issues as possible during 2015 and 2016.

“We are pleased to have reached this agreement and hope that it will be accepted by the remaining claimant group(s) so that this long course of complex and costly litigation can now be concluded.”

However, Shore Capital analyst Gary Greenwood said: “It remains possible that a further amount may need to be set aside should agreement not be reached with the remaining two shareholder groups and were RBS to lose the subsequent court case.”